Learn / Fundamentals / Valuation / P/S Ratio
P/S = Share Price ÷ Revenue Per Share
This number tells you how many dollars you pay for each dollar of company sales. When there is no profit yet, sales still give you a price tag to work with.
01 Feel it first
Start with a money-losing company — P/E goes blank. Hit "Use sales instead," then tap a business-type button to set how much of each sales dollar becomes profit.
02 Break the intuition
A grocer at 0.4× sales vs software at 10× can be a similar deal if profit margins differ enough. Peel the cards to see why.
03 Scrub the scale
Drag the P/S needle. The multiple alone does not tell you if a stock is cheap. Margins decide how much of each sales dollar becomes profit.
At 5× sales, a 20% margin implies ~25× earnings. At 3% margin the same P/S implies ~167×. Always pair P/S with how much profit the business keeps.
04 Sort them out
Loss-makers still carry a P/S. Sort each card by whether the sales multiple looks reasonable once you know the margin story.
Tap a card, then sort into Could be cheap or Likely overpriced.
Tap a card, then tap a bucket.
05 Two flavors
Same price, different sales number on the bottom of the fraction.
06 The catch
Grocery chains live at low multiples; software lives at high ones. Compare peers, not the whole market.
07 Check yourself
08 Where it breaks
One-time sales, customers who do not stick around, or aggressive accounting can inflate the sales number without lasting cash.
Pushing product into warehouses juicing near-term sales. P/S looks cheaper right before the hangover.
A rock-bottom P/S on a 1% margin business can still be an expensive earnings multiple.
P/S only looks at the stock price (equity = owners' claim). If peers carry very different debt loads, compare enterprise-value-to-sales instead — you inherit the debt.
See trailing and forward sales multiples next to margins and peers — then screen for names priced on revenue, not hope alone.
This company loses money or barely earns — P/E reads N/A. Click "Use sales instead."
When a company has no profit, P/E cannot help you. Price-to-sales still works — but you must guess what margin will arrive later.